What would you have to do not to get a bonus?
AIG, the insurance giant that was essentially nationalized in September, has confirmed to the Associated Press that it’s paying bonuses to employees who sold credit default swaps — the very deals that helped cause millions in losses, leading to the company’s collapse.
According to news reports, the bonuses amount to $450 million — or $1.13 million for each of the 400 staffers in the financial products unit.
In a statement, an AIG spokeswoman confirmed the bonuses, but not the dollar figure:
We adopted and disclosed this contractual retention program months before the government provided support to AIG. We did so because it was clear, given the market environment, that we would need to retain employees to manage the complex issues arising in our Financial Products business, which we are now unwinding.
An expert tells AP that it’s possible AIG was contractually obligated to pay the bonuses. But that points up a larger problem: the TARP didn’t allow the government to invalidate those agreements, as a bankruptcy judge would have been able to do. Since AIG and other firms were essentially bankrupt, there’s a good argument that the same rules should apply.
Former Merrill Lynch CEO John Thain has come in for criticism (by TPMmuckraker, among others) for signing off on billions in bonuses, on an accelerated schedule, despite seeing massive losses and a government assisted takeover by Bank of America.
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